Business owners who are contemplating whether or not to pursue small business loans are often encouraged to ask themselves a number of questions. The point of this is to consider the alternative: What would happen if you chose not to apply? It’s easy to answer this question when you are taking out a small business loan for a specific expense or initiative. But others might be more torn in terms of advantages and disadvantages. In these cases, the business owner must examine factors that can’t always be measured in numbers or historical information.
This will show him or her that extra cash is far from the only thing you’re getting when you are given the right small business loan for your needs. Here are four dangerous small business mistakes you can avoid by saying “yes” to that application:
1. Forgetting When It’s Okay To Stop Scrimping
In your business’s early stages, it’s completely understandable to be excessively frugal. Chances are, you are operating on a shoestring and do not have the data to support a substantial investment. But getting too caught up in this mentality can make you forget that it must eventually come to an end. It doesn’t help that there’s no universal rule for when it’s finally time to spend money to grow your business. And when that time comes, what should you spend that money on?
For a great deal of young businesses, their first major business investment was related to marketing, equipment, or people. This is likely because the business reached a point where scrimping in these areas would impede both short and long-term efforts. Had the business continued with its usual spending habits, the error might not have been realized until it was too late. Applying for your first working capital loan, SBA Loan, business line of credit, or other type of small business loan shows that you can recognize when to stop scrimping and start spending, which is a monumental time in your career.
2. Starting Business Partnerships Off On The Wrong Foot
Business partnerships often begin with negotiation. The two parties work out a deal that ensures each of them will be properly compensated. This is challenging because you don’t want to spend or charge too much money, but you also don’t want to insult your new business partner. In certain industries, it simply doesn’t pay to be a vicious negotiator. You may feel like you’ve “won” the negotiation but you’ll soon discover that the business partner is not fulfilling your expectations. The business partner feels undervalued and is therefore not performing to the best of their ability.
So, if you are looking to strike a deal for a vital service (marketing, delivery, etc), your first priority should not be to get the lowest price. With a merchant cash advance, you can start business partnerships off on a positive note and set the precedent for the rest of the relationship. After all, such partnerships are typically long-term investments that bring the greatest rewards later on. You would theoretically have an easier time paying off the debt because of the increases in sales that comes from your business partner.
3. Overlooking The Rewards Of Worthy Investments
Speaking of rewards; you won’t even be able to notice them if you are worried about spending too much money. A central purpose of hiring people to perform a service is to make your life easier. You will earn more money, have more time to focus on other important endeavors, enhance your reputation through the industry, etc. But you can only enjoy the true depth of these rewards if you know you won’t struggle to pay your bills at the end of the month. Without sufficient funding to sustain your business as you grow, you won’t feel like you have more time or are slowly gaining more leads because you’ll be desperately trying to increase revenue as soon as possible.
4. Growing Too Fast
Countless young businesses make the mistake of growing too fast. Had they carefully reviewed their cash flow and future projections before moving forward, they would have realized they wouldn’t be able to sustain the initiative for as long as they thought. Small business loans force you to think before you grow. In order to be approved, you must make sure you have the cash flow to fulfill a certain repayment system while covering other expenses that will undoubtedly arise along the way.
Paying off a small business loan teaches you how to manage debt and only borrow enough money that you can afford to pay back. You have to be optimistic but realistic as well, both of which are essential qualities of any successful business leader.